HC Deb 02 July 1962 vol 662 cc159-78

(1) Paragraph 10 of the Sixteenth Schedule to the Income Tax Act, 1952, and paragraph 3 of the Seventeenth Schedule to that Act (which relate to the allowance of double taxation relief on certain dividends paid to a company resident in the United Kingdom and controlling, directly or indirectly, not less than one half of the voting power in the company paying the dividend, and provide for taking account of the foreign tax paid by the last-mentioned company in respect of its profits) shall each be amended as follows:

  1. (a) after the words "in the company paying the dividend" there shall be inserted the words "or which controls, directly or indirectly, a proportion of that voting power greater than one quarter and is subject to a local limitation preventing it from controlling a larger proportion"; and
  2. (b) at the end of the paragraph there shall be added the words—
In this paragraph local limitation' means a limitation imposed by the law in force in the territory where the company paying the dividend is resident, or by executive action of the Government of that territory.

(2) Where a company resident in the United Kingdom either—

  1. (a) controls, directly or indirectly, not less than one half of the voting power in a company resident in a territory outside the United Kingdom; or
  2. (b) controls, directly or indirectly, a proportion of that voting power greater than one quarter and is subject to a local limitation preventing it from controlling a larger proportion:
then, for the purposes of any credit to be allowed to the first-mentioned company in accordance with the Sixteenth or Seventeenth Schedule to the Income Tax Act, 1952, in respect of a dividend paid to it by the other company, tax payable by the other company in respect of its profits under the law of any territory outside the United Kingdom shall be taken into account as if it were payable under the law of the first-mentioned territory, and paragraphs 7 and 8 of the said Sixteenth Schedule (which relate to the computation of the amount of income in certain cases where double taxation relief is allowed) shall apply accordingly.

In this subsection "local limitation" has the same meaning as it has (by virtue of subsection (1) above) in paragraph 10 of the said Sixteenth Schedule and paragraph 3 of the said Seventeenth Schedule.

(3) This section shall have effect only in relation to dividends by reference to which income tax is chargeable for the year 1962–63 or a subsequent year of assessment and (for the purposes of the profits tax) in relation to any other dividends which are received after the end of March, nineteen hundred and sixty-two, and by reference to which income tax is not chargeable for any year of assessment.—[Mr. Barber.]

Brought up, and read the First time.

Mr. Barber

I beg to move, That the Clause be read a Second time.

The new Clause follows from an undertaking which I gave in Committee concerning two points which had been raised by my hon. Friend the Member for Shipley (Mr. Hirst). As will be seen, the Clause concerns double taxation relief. It deals with two separate points, although they are inter-related. The first is the question of relief for underlying tax and the second concerns relief for what is sometimes known as third country tax.

In regard to the first point, relating to underlying tax, my hon. Friend the Member for Shipley moved a new Clause in Committee in which he proposed to allow relief for underlying tax. This, I should explain, is tax paid on the profits of a company out of which a dividend is paid. My hon. Friend proposed that there should be relief for that tax where a United Kingdom company controls not less than 25 per cent., instead of not less than 50 per cent., of the voting power of an overseas company paying a dividend.

When I replied to my hon. Friend. I explained that I could not advise the committee to go as far as was contemplated in his new Clause but that I believed that there were cogent arguments for the kind of case where the United Kingdom company has a large holding in an overseas company, but where the Government of the country in which the overseas company is resident refuses to allow the United Kingdom company to have a majority interest and insists that control should be in the hands of local residents. This is a situation which exists—hon. Members will probably themselves know instances—in a number of cases, and I suppose the number is likely to be extended in the present world situation.

9.45 p.m.

The new Clause proposes that the existing provisions concerning double taxation relief for underlying tax should be extended so as to give relief where the United Kingdom company has the maximum shareholding permitted by the law or practice of the foreign country, subject to an overriding minimum of 25 per cent. Subsection (1) of the new Clause includes provisions which will enable relief to be allowed in those circumstances.

The second point with which the Clause is concerned is, as I said, what is known as third-country tax. Perhaps I can best put the point to the Committee in this way. I think it will be generally agreed that there is no good reason why a shareholder who gets a dividend from a company which is resident in country A should not get relief for the tax paid by the company in country B just as much as for tax paid in country A. In other words, one has the case of a shareholder in the United Kingdom with an interest in a company which is resident abroad and that company has not only to pay underlying tax in the country in which the company is resident but also has to pay tax which is levied for one reason or another by a third country.

As I say, I can see no reason in principle why one should not try to cover that sort of case. It seems to me to he, as a matter of principle, irrelevant whether the tax which is borne by the company resident overseas is levied by the country in which it is resident or by a third country. The Clause, therefore, proposes that relief should be allowed for third-country tax in the same classes of case as those in which relief is given for tax paid in the country where the paying company is resident—that is to say where the United Kingdom company controls 50 per cent. or more of the voting power of the company paying the dividend—and also under subsection (1) of the Clause where it controls the maximum shareholding permitted by the law or practice in the foreign country, subject again to an overriding minimum of 25 per cent. This is, I believe, a worth while reform which will bring relief in a number of deserving cases, and I commend it to the Committee.

Mr. Geoffrey Hirst (Shipley)

I thank my hon. Friend and my right hon. and learned Friend. I raised this matter, as my hon. Friend said, in as reasonably an erudite way as one can at two o'clock in the morning. It is a highly technical matter. I am very grateful for what my hon. Friend has said. The statement was made at the time that he could not go as far as I wanted, but the strings which he has attached are very reasonable—that the provision should be kept within the limit of what is permissible in regard to a holding in the countries concerned.

That takes cognisance of the point I made on that occasion, which is terribly important. We have a changing pattern overseas now in the Commonwealth, and we have to adjust ourselves a little more—I made this point about the changing pattern—to make sure that we are not losers as a result of it. I am very grateful to the Economic Secretary. If he will allow me to pay him the compliment, his speech has shown the careful study being given to this very important matter and I am extremely grateful to him for it.

Mr. Douglas Houghton (Sowerby)

I listened very attentively to the hon. Member for Shipley (Mr. Hirst) when he first put these matters before the Committee. He was in pretty good form, on and off, in Committee. I did not quite accept all the arguments which he used then, but I put that down to the time of night when we were considering the matter, and we waited to see what the Government would propose.

I am not very impressed by the case which the hon. Member or the Economic Secretary has put. This proposal is to give relief from United Kingdom Income Tax. It is our Revenue which is to surrender tax. We are the country which is to give the tax relief. Under the 1952 Act, double Income Tax relief is given where at least half a company in an overseas territory is owned by United Kingdom interests. That relief is based on the position of an overseas company which is substantially owned in this country, and one can see that in those circumstances it would be unfair to charge full United Kingdom Income Tax on top of local income tax when such a substantial investment overseas is held by an English company.

But now it is proposed to give corresponding double Income Tax relief in oases where the United Kingdom ownership is as low as 25 per cent., in cases where the local territory imposes a limitation upon the ownership by United Kingdom interests of more than 25 per cent. If another country is so jealous of its own territorial ownership of companies operating within its boundaries as to impose a limitation of 25 per cent. on United Kingdom ownership, it must take into account the fiscal consequences of that limitation. It cannot have it both ways.

To give a company in those circumstances the same concession as that given to a company holding at least 52 per cent. of the equity shareholding, as under the 1952 Act, is to encourage other countries arbitrarily to curtail United Kingdom ownership of companies operating within their boundaries. I do not see that that is doing any good and it is certainly not assisting the expansion of United Kingdom investment in territories overseas. It is encouraging other countries to restrict United Kingdom ownership and at the same time giving the benefit of double Income Tax relief to those in this country who hold shares which would otherwise be subject to both lots of tax.

Mr. Hirst indicated dissent.

Mr. Houghton

The hon. Member for Shipley (Mr. Hirst) is shaking his head, but I think the Committee will agree that before we give further relief from United Kingdom Income Tax we should be certain that these reliefs are justified and in the national interest, and not designed merely to accommodate our taxation system to the nationalistic policies of overseas territories, whatever they may be.

At the moment I am not satisfied about this new Clause. It is long and complicated, but the issues seem to be fairly clear, and if there is anything further that either the Economic Secretary or the hon. Member for Shipley can tell the Committee to convince us that this is the right and proper thing to do, we shall be receptive and keep open minds, but we are jealous of the safeguards which the Revenue must have against unwarranted reliefs being given against United Kingdom Income Tax in respect of taxes paid to other countries, because that is what we are talking about.

It is only because taxation is levied in another country that we are having to consider giving tax relief in this country by taking into account, as the new Clause says, taxes paid in that other country. We have to be satisfied, therefore, that we are not bearing a disproportionate burden of the tax relief. After all, if other countries want investment from the United Kingdom, they should adjust their taxation systems to match their policies and not expect the United Kingdom to give all the taxation reliefs after they have had their share by taxing profits which arise from the companies operating in their territories.

The hon. Member for Folkestone and Hythe (Mr. Costain) is looking very restive. There must, therefore, be some sort of answer, and the sooner I sit down and listen to it the better, but I warn the Economic Secretary that he is a little stuck at the moment on this new Clause, because we are not satisfied about it.

Mr. Hirst

I do not want to delay the Committee. I am grateful to my hon. Friend the Economic Secretary, who is far from stuck. With the greatest respect to the hon. Member for Sowerby (Mr. Houghton)—and, incidentally, I join him when he talks about the need to protect the national interest—I do not think that he should be too parochial. It was all right laying down 50 per cent. and all these other rules when, as it were, we ruled the roost, but in view of the considerable changes which have occurred, and the growth of nationalism, of which I think hon. Gentlemen opposite are rather fond, we do not do that at all. The mere fact that we do not do it does not, however, mean that we do not want to encourage and take every advantage of overseas investment.

I quarrel with the idea that this is contrary to that idea. If there are not these advantages, there will not be the necessary investment. We have, therefore, to meet the situation as we see it. We must not be parochial, but, rather, empirical. The new Clause, as I argued it at two o'clock in the morning, I admit, is put down to meet the situation as it is now developing, and as it clearly will continue to develop. I applaud my right hon. and learned Friend and my hon. Friend for their approach to this matter. It is realistic, and I am grateful to them.

10.0 p.m.

Mr. J. T. Price

I agree with my hon. Friend the Member for Sowerby (Mr. Houghton) that an adequate case has not been made out for the new Clause. I do not say this for any malevolent purpose, but as a practical man I recognise that even with the present Ministers in charge of the Treasury, with all their limitations, this House is the only guardian of British interests, which include very important financial interests, in international trade.

I want to draw attention to something which is directly linked with the point that we are discussing. Today, we are concerned with a paper concession which the Chancellor has decided to make in his solicitude to safeguard British subjects, who invest their money in property which is partly nvested abroad, against the evils of double taxation. Many double taxation agreements exist with different countries. They are matters of private arrangement and ordinary negotiation. But to express this as a general principle in a manner in which the Economic Secretary has done is not good enough.

This question must be considered against the background of something else which the House has done. When we were discussing Clause 28 of the 1957 Finance Bill we dealt with a matter which became known as the concession to the overseas trading corporations. An attempt was made by the Treasury to encourage foreign investment and to make fiscal arrangements that would accord with that policy. We then set up a system under which a concession would be made, on the granting of a certificate by the Treasury, in respect of British-registered companies wholly resident in this country whose capital was registered under the normal processes of British law, to the effect that the profits made on overseas operations could be retained in those countries and not returned for taxation purposes to London.

The Chancellor of the Exchequer (Mr. Selwyn Lloyd) indicated assent.

Mr. Price

The Chancellor nods. He will recall what I have in mind.

A few months ago I put down a Question to the Minister concerned, and I was told that as a result of the concession given in 1957 the loss to the Treasury in respect of moneys retained overseas and not returned for taxation to London was £9 million in 1958; £11 million in 1959, and £16 million in 1960— an increasing amount each year.

Since another concession is now being made, making a further hole in the public purse and the Exchequer account— a hole through which the products of foreign investment are not returned to this country—we are approaching a situation in respect of which, in recent months, the Chancellor has made great play, namely, a situation in which there are balance of payments difficulties, of which we are all too painfully aware. It is a situation in which this country cannot balance its accounts with its commitments overseas.

One of the salient features of the Chancellor's Budget statement which impressed a great many of us but which was not greatly debated at the time was that practically no invisible exports were returned to this country. Invisible exports, in terms of the products of foreign investments, insurance and shipping, in normal years used to amount to £400 million, which went to our credit in our balance of payments. At the time of the last Budget there were practically no invisible exports in our national accounts.

Is that surprising? Too many loopholes have been opened. What is the use of British investment overseas if, first, it does not provide employment for British subjects in this country and, secondly, it does not provide a credit balance towards our balance of payments in the national account? This question cannot be wafted aside by theoretical arguments. Our balance of payments now has none of the advantages that it used to have in the way of invisible exports. Companies are rearranging their accounts and are extracting from the Treasury a series of concessions of this kind, plus the major concession given in the Finance Act, 1957, which make it impossible for the products of overseas investment to bring in any returns to the British Exchequer.

These are very serious, valid arguments, linked directly with the new Clause tabled by the Chancellor. The new Clause proposes further to excuse large chunks of taxation attracting a charge for the Revenue. If the investment is over 50 per cent., why should we stand aside and see the foreign country take advantage to encourage investment outside this country? I am not a Little Englander, nor have I a narrow, sentimental outlook. I do not deny that the spread of investment throughout the world is a task to which we should all lend ourselves as far as our abilities allow, but if the country which receives the investment is to have the product of it in employment of its natives and also the advantage in taxation, it is time we woke up.

We are not discharging our function if we give way all along the line to something which does not do credit to our common sense or sense of trusteeship of the people who send us here to look after their interests.

Mr. Barber

I assure the hon. Member for Westhoughton (Mr. J. T. Price) that while in the very nature of things it is impossible to give any estimate of the cost of this new Clause we certainly believe that it will be very small indeed. The hon. Member asked us why. The reason is that we do not know how many taxpayers there are who will benefit from this concession for the simple reason that they have not put in claims in past years. The best estimate that can be made is that the cost will be very small indeed and the numbers will be very few. To talk in terms of an overseas trading corporation and £7 million a year is incorrect, for the cost will not be of that nature.

Mr. J. T. Price

I remind the hon. Gentleman that he is now producing what is known as the de minimis argument, the servant girl's baby, which was "only a little one". In 1957, when the Clause to which I refer was before the House, I challenged it. I did so in a rather clumsy way, I admit, but, nevertheless, I was dealing with the principle. The present Minister of Health, who was then Economic Secretary, told me exactly what the Economic Secretary is telling me now. He said that this was a very small matter and that it was hoped in a very few years that this step would make a considerable contribution to offset our losses. It has. The figures are "in the red", minus £9 million, minus £11 million and minus £16 million in three years.

Mr. Barber

If the hon. Member had not intervened at such length he would have found that I was about to deal with the question of principle on the basis that it is not enough, as I agree. I thought that he was going on to make a good point and not merely to say that we do not think that this will involve any great cost. A point of principle is involved, which was raised quite fairly by the hon. Member for Sowerby (Mr. Houghton).

I should have thought that if one were looking at the principle of the matter there is no good reason why relief for underlying tax should not be available generally, irrespective of the size of the shareholder's holding. This seems to me to be the basic principle from which we should start, and I remind the Committee that with regard to all Commonwealth countries relief for underlying tax is given without qualification. In most of our double taxation agreements there is provision for relief for underlying tax. While it is not conclusive, it is a relevant factor that the majority of the Royal Commission on the Taxation of Profits and Income favoured the extension of relief for underlying tax to all cases.

The hon. Member for Sowerby seemed to concern himself rather more with the effect of this concession on the overseas country which levies the tax than on the United Kingdom taxpayer. I have had occasions since I have been at the Treasury to consider one case of a United Kingdom company—not a large company—with a very fine history which invested a considerable sum of money in a subsidiary company overseas and had a controlling interest. It has a little over a 50 per cent, controlling interest and, consequently, under the existing law it got relief for underlying tax.

Unfortunately, in the last year or two it has been forced by devious means to sell part of the shareholding to local inhabitants, and now its holding is just under 50 per cent., and as a result it has been hit very hard because, under the law as it stands, it will no longer get relief for underlying tax.

We must consider this matter not only from the point of view of the other countries, but also from the point of view of the United Kingdom taxpayer, because there are one or two very hard cases. The hon. Member said that in my opening remarks I did not explain the likely effect on our balance of payments, and he asked whether this would make investment abroad more or less attractive.

The view which we hold, having considered the matter very carefully—it is certainly not merely an Inland Revenue matter in a narrow sense, but also is of considerable concern to the Treasury from the point of view of the balance of payments—is that, on balance, to provide relief for underlying tax makes investment in other countries more attractive. This is one of the factors which we use as a bargaining counter when negotiating double taxation agreements.

It is because, in this case, we are making provision for relief from double taxation where there is no double taxation agreement that we have decided to limit it to the case in which the United Kingdom shareholder owns not less than 25 per cent. of the shares in the other country. We believe that this will not significantly weaken our bargaining position, but it was certainly one of the factors which we had in mind. I think that, on balance, this is a good thing to do. I earlier explained the nature of the Clause and how it operates, and on the point of principle I think that it is a desirable thing to do.

10.15 p.m.

Mr. Houghton

I am sorry to detain the Committee for a little longer but I am still in difficulty. I could quite understand if as a matter of taxation policy we decided that relief from United Kingdom Income Tax should be given to all investors overseas who were subject to local income tax. That would be a clear policy which we well understood whether we agreed with it or not. But that has not been our policy and that is not our starting point this evening. Our starting point this evening is that in the past, when a United Kingdom company has gone overseas, we have given it relief from United Kingdom Income Tax in respect of local taxes paid by a company which is substantially owned by the United Kingdom company and operates abroad in a territory which is neither in the Commonwealth nor in a country covered by a double taxation relief agreement.

It is easy to see the basis upon which that has been done. It has been done with United Kingdom companies operating in overseas territories when the overseas companies have been owned as to at least one-half by shareholders in the United Kingdom. They are therefore British-owned companies operating overseas and paying dividends to British shareholders That is all very clear.

Suppose an overseas territory says to such a company, "We do not like the look of you. You are too heavily owned by shareholders in the United Kingdom and that is an affront to our sense of national pride", or for other reasons, perhaps economic, the territory wishes to deprive the United Kingdom shareholders of control of the local company and therefore imposes a limitation. Suppose arbitrarily the overseas territory imposes a limitation upon the shareholding which may be held in the United Kingdom. Then the company has ceased to be a United Kingdom company. It has become a locally-controlled company and, substantially, a locally-owned company. That raises quite different considerations in regard to taxation.

The Economic Secretary has said that cases have arisen in which great hardship has been caused by the action of the overseas territory, but apparently the overseas territory has not been concerned about the hardship that it has imposed upon shareholders in the United Kingdom who have invested their money in the overseas territory with a view to economic development. I hope that I do not sound unsympathetic to shareholders whose condition has been altered for the worse by the action of other countries. But this is a matter for discussion and negotiation between Her Majesty's Government and the territories concerned. Surely we are not going to allow British shareholders to be pushed around like this by overseas territories without suitable arrangements being made concerning taxation. What the Economic Secretary is asking is that the conesquences of the arbitrary action of the overseas territory shall be alleviated by relief from United Kingdom tax. He is saying that the British taxpayer should foot the bill.

We do not see it in that light. I am not concerned for the moment with whether the amount of revenue involved is small. After all, many matters on which we have asked for concessions would have involved a small amount of revenue.

Mr. Barber

Wherever we can we will negotiate a double taxation relief agreement, but that is not always possible. We are not prepared to negotiate an agreement which, taken by and large, is not reasonably favourable to us. We would certainly prefer to negotiate agreements, but we must face the fact that there are cases in which we cannot do so.

Mr. Houghton

I am very much obliged to the Economic Secretary, because he has let the cat out of the bag. We are now dealing with territories which will not play ball. They will not negotiate a double taxation relief agreement. They arbitrarily require the United Kingdom company to divest itself of certain shareholding in the company in their territory. By force they effect the transfer of the ownership of the company into the hands of their own nationals and in general rather throw a lot of rough stuff about. The Economic Secretary tells the Committee that the British taxpayer must find some relief for those who are hard hit by such treatment. The Economic Secretary's fiscal remedy is not the proper remedy for this situation. This is really a matter of international relationships——

Mr. A. P. Costain (Folkestone and Hythe)

rose—

Mr. Houghton

No, I am on a very high and moral line now.

This can be raised from the sordid detail of tax relief to a question of whether the United Kingdom is willing to be treated in this way. Our investors have gone overseas, partly for enlightened self-interest, and partly for the development of the territory overseas, and some consideration must be given by the countries concerned to the consequences of what they are doing. There is no evidence, except the Economic Secretary's last intervention, that that side of the matter is concerning them in the least. I must say that at the moment we do not regard fiscal relief as the remedy for this situation.

Mr. Callaghan

Surely, we are to have an answer?

Mr. Barber

I have now spoken at some length on two occasions concerning a matter which was debated previously—true, at two o'clock in the morning—when I replied at length to the very able speech of my hon. Friend the Member for Shipley (Mr. Hirst). Frankly, having spoken twice already, I thought that there was little more I need to say except to deal with the one point raised by the hon. Member for Sowerby (Mr. Houghton). I listened to him carefully, and I hope that in fairness he will agree that, apart from that one point, there was not a single question in his speech. In other words, he was making an argument.

If the hon. Gentleman thinks that this is bad policy; that we should not encourage investors in foreign territories to the very limited extent contained in this Clause; that we should not give relief to British taxpayers as a result of something which happens entirely out of their control and which hits them in a way which, in some cases, causes considerable hardship, he should, of course, vote against the new Clause.

Mr. Callaghan

Is it the hon. Gentleman's duty to help the shareholders of this country irrespective of the consequences to the general body of the taxpayers? That, in fact, is what he is now doing. He is proposing to visit on the general body of the taxpaying public the consequences of his failure to effect a double taxation agreement with some of these countries. That is the case made out by my hon. Friend the Member for Sowerby (Mr. Houghton), to which there has been no reply.

The hon. Gentleman is entirely misconceiving both his duty and that of the Treasury. It is not the Treasury's job to help overseas investments, but to help overseas investments where there is to be a dividend for the nation. That is the Treasury's job. The countries which have refused to make a double taxation agreement—those with which there is no taxation reciprocity at all— are the very sort where a quick profit may be made but where, equally, there is very unlikely to be any return to the taxpayer.

The hon. Member for Shipley (Mr. Hirst) looks like a cat that has got at the cream. That, of course, is the fact. I have never seen an hon. Member look at his own Front Bench so benignly. He has that benign expression because he has obtained a concession—large or small. The Economic Secretary says that it is small but, if that is the case, how can it he of help to overseas investors'? We have only heard the hard case of one company. No case has been made out by the hon. Gentleman.

Does not this illustrate, once again, the debauchery going on in our own taxation system? I hope that the Chancellor will take this matter seriously, because it is serious that our taxation system should be getting so twisted that practically any concession can be wrung out of the right hon. and learned Gentleman by pressure being placed on him, irrespective of the general structure of the system.

The whole basis for the 50 per cent. provision was purely to ensure a majority holding so that the Inland Revenue could demonstrate its authority and get the information necessary concerning the extent of the double taxation relief that was needed. In other words, the Inland Revenue wanted proof before it gave any relief. As soon as the figure gets below 50 per cent. of the voting power—and 25 per cent. is proposed—it makes it impossible for the Revenue to prove any case and with the figure of 25 per cent. the Revenue will find it impossible to get the necessary information before giving any taxation reliefs.

The Economic Secretary now proposes to give carte blanche to this group of shareholders investing in companies in countries which are not willing to enter the double taxation system. The hon. Member for Shipley has persuaded the Government. irrespective of the general interests of the body of British taxpayers, to give reliefs of this sort.

Mr. Hirst

Rubbish.

Mr. Callaghan

It is all very well for the hon. Member to say "Rubbish", but he knows that that is exactly what he has done. The Inland Revenue can only prove whether double taxation relief should be given in these cases or how much should be given if it can get the necessary information. Is that not so? I ask the Economic Secretary to correct me if I am wrong.

The Inland Revenue is unable to do this unless there is a voluntary agreement by the company concerned to supply the information. Is it likely that a company in a country which has refused to make such an agreement with us will voluntarily give the Inland Revenue this information? Of course not. Let us be quite clear about this. The Economic Secretary has encouraged every nation requiring more investment from overseas but not wishing to enter a double taxation agreement to reduce the figure to 25 per cent. and to refuse to enter into an agreement with us.

Despite all this, the Economic Secretary says, "It will he all right. The general body of British taxpayers will make up the deficiency." We have received no answers to the questions put by my hon. Friend the Member for Sowerby. This is another case of scuttle. It is because the Government are willing to accede to the pressure brought upon them by the hon. Member for Shipley that hon. Gentlemen opposite are faced with the situation of being asked to vote in favour of a policy which will mean that the general body of taxpayers will pay for the failure of the Government to secure the proper rights of the Inland Revenue and the Government should have before making concessions of this sort.

The Treasury has been wrong and weak to be over-ruled in this matter by the hon. Member for Shipley. They have done so merely to purchase his good will. Is not the expense of purchasing that good will a little high? I do not blame the hon. Member for Shipley for appearing so happy. He has got away with the swag but I see no reason why the companies concerned, the tiny handful involved, should get away with the swag without the House of Commons knowing what has been done.

Question put, That the Clause be read a Second time:—

The Committee dividedAyes 217. Noes 139.

Division No. 227.1 AYES [10.29 p.m.
Agnew, Sir Peter Gower, Raymond Peyton, John
Atkins, Humphrey Green, Alan Pickthorn, Sir Kenneth
Balnlel, Lord Gurden, Harold Pitman, Sir James
Barber, Anthony Hall, John (Wycombe) Pott, Percivall
Barlow, Sir John Harris, Frederic (Croydon, N.W.) Prior, J. M. L.
Barter, John Harris, Reader (Heston) Proudfoot, Wilfred
Batsford, Brian Harrison, Col. Sir Harwood (Eye) Pym, Francis
Bennett, F. M. (Torquay) Harvey, Sir Arthur vere (Macclesf'd) Redmayne, Rt. Hon. Martin
Bidgood, John C. Harvey, John (Walthamstow, E.) Rees, Hugh
Biffen, John Hastings, Stephen Rees-Davies, W. R.
Biggs-Davison, John Hay, John Renton, David
Birch, Rt. Hon. Nigel Heald, Rt. Hon. Sir Lionel Ridley, Hon. Nicholas
Bishop, F. P. Henderson, John (Cathcart) Rippon, Geoffrey
Black, Sir Cyril Hendry, Forbes Roberts, Sir Peter (Heeley)
Bossom, Clive Hlley, Joseph Rodgers, John (Sevenoaks)
Bourne-Arton, A. Hirst, Geoffrey Roots, William
Bowen, Roderic (Cardigan) Hobson, Sir John Ropner, Col. Sir Leonard
Boyle, Sir Edward Hocking, Philip N. Royle, Anthony (Richmond, Surrey)
Brewls, John Holland, Philip St. Clair, M.
Brooke, Rt. Hon. Henry Hollingworth, John Scott-Hopkins, James
Brown, Alan (Tottenham) Hoosen, H. E. Seymour, Leslie
Browne, Percy (Torrington) Hopkins, Alan Shaw, M.
Buck, Antony Hornby, R. P. Shepherd, William
Bullard, Denys Howard, Hon. G. R. (St. Ives) Smith, Dudley (Br'ntf'd & Chiswlck)
Campbell, Gordon (Moray & Nairn) Hughes-Young, Michael Smithers, Peter
Carr, Compton (Barons Court) Iremonger, T. L. Spearman, Sir Alexander
Carr, Robert (Mitcham) Irvine, Bryant Godman (Rye) Stanley, Hon. Richard
Cary, Sir Robert James, David Stevens, Geoffrey
Channon, H. P. G. Jenkins, Robert (Dulwich) Steward, Harold (Stockport, S.)
Chataway, Christopher Jennings, J. C. Storey, Sir Samuel
Chichester-Clark, R. Johnson, Dr. Donald (Carlisle) Studhoime, Sir Henry
Clark, Henry (Antrim, N.) Johnson, Eric (Blackley) Summers, Sir Spencer
Cole, Norman Kerans, Cdr. J. S. Talbot, John E.
Collard, Richard Kershaw, Anthony Tapsell, Peter
Cooke, Robert Kirk Peter Taylor, Edwin (Bolton, E.)
Cooper, A. E. Lancaster Col C G Taylor, Frank (M'ch'st'r, Moss Side)
Cooper-Key, Sir Neill Legge-Bourke, Sir Harry Taylor, W. J. (Bradford, N.)
Cordeaux, Lt.-Col, J. K. Lewis, Kenneth (Rutland) Teeling, Sir William
Corfield, F. V, Lilley, F. J. P, Thomas, Leslie (Canterbury)
Costain, A. P. Linstead, Sir Hugh Thomas, peter (Conway)
Coulson, Michael Litchfield, Capt. John Thompson, Richard (Croydon, S.)
Critchley, Julian Lioyd, Rt. Hon. Selwyn (Wirral) Thorpe Jeremy
Crowder, F. P. Longbottom, Charles Tiley, Arthur (Bradford, W.)
Curran, Charles Longden, Gilbert Touche, Rt. Hon. Sir Gordon
Currie, G. B. H. Loveys, Walter H. Turner, Colin
Dance, James McLaren, Martin Turton, Rt. Hon. R. H.
d'Avigdor-Goldsmid, Sir Henry Maclean, sir Fitzroy(Bute&N.Ayrs) Tweedsmuir, Lady
Deedea, W. F. Macleod, Rt. Hn. lain (Enfield, W.) van Straubenzee, W. R.
de Ferranti, Basil McMaster, Stanley R. Vane, W. M. F.
Digby, Simon Wingfleld Macmillan, Maurice (Halifax) Vaughan-Morgan, Rt. Hon. Sir John
Donaldson, Cmdr. C. E. M. Macpherson, Niall (Dumfries) Vickers, Miss Joan
Doughty, Charles Maddan, Martin Wade, Donald
Drayson, G. B. Maginnis, John E. Wakefield, Sir Wavell
du Cann, Edward Manningham-Buller, Rt. Hn. Sir R. Walder, David
Duncan, Sir James Markham, Major Sir Frank Walker, Peter
Elliot, Capt. Walter (Carshalton) Marten, Neil Walker-Smith, Rt. Hon. Sir Derek
Errington, Sir Eric Mathew, Robert (Honlton) Wall, Patrick
Farey-Jones F. W. Matthews, Gordon (Meriden) Ward, Dame Irene
Farr, John Mawby, Ray Webster, David
Fell, Anthony Maxwell-Hyslop, R. J. Wells, John (Maldstone)
Finlay, Graeme Maydon, Lt.-Cmdr. S. L. C. Williams, Paul (Sunderland, S.)
Fisher, Nigel Mills, Stratton Wills, Sir Gerald (Bridgwater)
Fletcher-Cooke, Charles Morgan, William Wilson, Geoffrey (Truro)
Forrest, George Nabarro, Gerald Wise, A. R.
Fraser, Hn. Hugh (Stafford & Stone) Neave, Airey Wolrige-Gordon, Patrick
Fraser Ian (Plymouth, Sutton) Noble, Michael Woodnutt, Mark
Gammans, Lady Oakshott, Sir Hendrie Woollam, John
Gardner, Edward Orr-Ewing, C. Ian Worsley, Marcus
Gilmour, Sir John Osborn, John (Hallam) Yates, William (The Wrekin)
Clover, Sir Douglas Page, Graham (Crosby)
Glyn, Dr. Alan (Clapham) Pannell, Norman (Kirkdale) TELLERS FOR THE AYES:
Goodhart, Philip Pearson, Frank (Clitheroe) Mr. J. E. B. Hill and
Goodhew, Victor Percival, Ian Mr. Michael Hamilton.
NOES
Ainsley, William Awbery, Stan Bennett, J. (Glasgow, Bridgeton)
Allaun, Frank (Salford, E.) Baxter, William (Stirlingshire, W.) Blackburn, F.
Allen, Scholefield (Crewe) Bence, Cyril Blyton, William
Bowden, Rt. Hn. H. W. (Leics. S.W.) Hunter, A. E. Price, J. T. (Westhoughton)
Braddock, Mrs. E. M. Hynd, John (Attercliffe) Probert, Arthur
Bray, Dr. Jeremy Irvine, A. J. (Edge Hill) Purvey, Cmdr. Harry
Broughton, Dr. A. D. D. Irving, Sydney (Dartford) Redhead, E. C.
Callaghan, James Janner, Sir Barnett Robertson, John (Paisley)
Castle, Mrs. Barbara Jay, Rt. Hon. Douglas Robinson, Kenneth (St. Pancras, N.)
Cliffe, Michael Jenkins, Roy (Stechford) Rodgers, W, T. (Stockton)
Collick, Percy Johnson, Carol (Lewisham, S.) Rogers, G. H. R. (Kensington, N.)
Corbet, Mrs. Freda Jones, Dan (Burnley) Ross, William
Craddock, George (Bradford, S.) Jones, Elwyn (West Ham, S.) Short, Edward
Cronin, John Jones, J. Idwal (Wrexham) Silverman, Sydney (Nelson)
Cullen, Mrs. Alice Jones, T. W. (Merioneth) Skeffington, Arthur
Davies, G. Elfed (Rhondda, E.) Kelley, Richard Slater, Joseph (Sedgefleld)
Davies, Ifor (Gower) King, Dr. Horace Small, William
Delargy, Hugh Lawson, George Smith, Ellis (Stoke, S.)
Diamond, John Ledger, Ron Sorensen, R. W.
Dodds, Norman Lee, Miss Jennie (Cannock) Soskice, Rt. Hon. Sir Frank
Dugdale, Rt. Hon. John Lever, L. M. (Ardwick) Spriggs, Leslie
Edelman, Maurice Lewis, Arthur (West Ham, N.) Stewart, Michael (Fulham)
Edwards, Rt. Hon. Ness (Caerphilly) Loughlin, Charles Stonehouse, John
Edwards, Walter (Stepney) Mabon, Dr. J. Dickson Stones, William
Evans, Albert MacColl, James Taverne, D.
Fernyhough, E. McKay, John (Wallsend) Taylor, Bernard (Mansfield)
Fitch, Alan Mallalieu, E. L. (Brigg) Thompson, Dr. Alan (Dunfermllne)
Fletcher, Eric Manuel, Archie Thornton, Ernest
Foot, Michael (Ebbw Vale) Mapp, Charles Tomney, Frank
Fraser, Thomas (Hamilton) Marsh Richard War boy, William
Galpern, Sir Myer Meason, Roy Weitxman, David
Ginsburg, David Mason, Roy White, Mrs. Eirene
Gordon Walker, Rt. Hon. P. C. Mendelson, J. J. Wigg, George
Greenwood, Anthony Millan, Bruce Wilkins, W. A.
Griffiths, W. (Exchange) Milne, Edward Williams, D. J. (Neath)
Hale, Leslie (Oldham, W.) Mitchison, G. R. Williams, LI. (Abertillery)
Hall, Rt. Hn. Glenvll (Coine Valley) Moody, A. S. Williams, W. R. (Openshaw)
Hamilton, William (West Fife) Morris, John Williams, W. T. (Warrington)
Hannan, William Mulley, Frederick Willis, E. G. (Edinburgh, E.)
Harper, Joseph Neal, Harold Wilson, Rt. Hon. Harold (Huyton)
Hayman, F. H. Noel-Baker, Francis (Swindon) Winterbottom, R. E.
Henderson,Rt.Hn.Arthur(RwlyRegia) Ollver, G. H. Woof, Robert
Herbison, Miss Margaret Owen, Will Wyatt, Woodrow
Hllton, A. V. Paget, R. T. Yates, Victor (Ladywood)
Holman, Percy Pargiter, G. A.
Houghton, Douglas Pearson, Arthur (Pontypridd) TELLERS FOR THE NOES:
Howell, Charles A. (Perry Barr) Peart, Frederick Mr. Grey and Mr. MeCann.
Howell, Denis (Small Heath) Pentland, Norman
Clause added to the Bill.